Mt. Vernon Fire Insurance Co. v. Louis Jancetic (mem. dec.) ( 2016 )

    Pursuant to Ind. Appellate Rule 65(D),                            Nov 04 2016, 9:37 am
    this Memorandum Decision shall not be
    regarded as precedent or cited before any                             CLERK
                                                                      Indiana Supreme Court
                                                                         Court of Appeals
    court except for the purpose of establishing                           and Tax Court
    the defense of res judicata, collateral
    estoppel, or the law of the case.
    ATTORNEYS FOR APPELLANT                                  ATTORNEY FOR APPELLEE
    Storrs W. Downey                                         Kevin W. Marshall
    Jeffrey E. Kehl                                          Hobart, Indiana
    Bryce Downey & Lenkov LLC
    Chicago, Illinois
                                              IN THE
    Mt. Vernon Fire Insurance Co.,                           November 4, 2016
    Appellant-Respondent                                     Court of Appeals Case No.
            v.                                               Appeal from the Lake Superior
    Louis Jancetic,                                          The Honorable Calvin D.
    Appellee-Movant                                          Hawkins, Judge
                                                             Trial Court Cause No.
    Baker, Judge.
    Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016     Page 1 of 7
    [1]   Mount Vernon Fire Insurance Company (Mount Vernon) appeals the judgment
          of the trial court, which, in a proceeding supplemental, found that an insurance
          policy issued by Mount Vernon covered a judgment against its insured, Source
          One Partners, LLC (Source One). Finding that the insurance policy clearly and
          unambiguously excluded intentional misrepresentations from coverage, we
          reverse and remand with instructions to enter summary judgment in Mount
          Vernon’s favor.
    [2]   In October 2011, Debra Hadu sold a property—through Source One, her real
          estate agent—in Crown Point to Louis Jancetic. As part of the transaction,
          Hadu filled out a disclosure form. On February 28, 2012, Jancetic filed a
          complaint, alleging that Source One and Hadu knew that there was a mold
          problem stemming from a water leak but represented in the disclosure form that
          there was no mold problem on the property. Jancetic further alleged that,
          because of this “fraudulent representation[],” he agreed to purchase the
          property and sustained damages thereby. Appellant’s App. p. 75. Jancetic later
          amended the complaint to add a home inspection company, which he alleged
          had been negligent in failing to find the mold, as a defendant.
    [3]   Source One had a “Real Estate Agents Errors And Omissions” insurance policy
          (the Policy) with Mount Vernon. Id. at 188. The Policy protected Source One
          from claims arising from negligent acts, errors, or omissions; personal injuries;
          allegations of discrimination; or improper use of the lock box on houses. The
          Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 2 of 7
          Policy explicitly excluded from coverage “any claim arising out of . . . any
          actual or alleged . . . dishonest, fraudulent, criminal or malicious act or
          omission or deliberate misrepresentation committed by, at the direction of, or
          with the knowledge of any Insured.” Id. at 191-92. The Policy also states that
          it “does not apply to . . . [claims] arising out of . . . any form of Organic
          Pathogen, whether or not . . . it is alleged that an Insured failed to discover or
          disclose the existence of Organic Pathogens from any source whatsoever.” Id.
          at 192, 179. “Organic Pathogens” was defined as “any organic irritant or
          contaminant, including but not limited to mold . . . .” Id. at 179.
    [4]   On March 27, 2012, Source One tendered Jancetic’s complaint to Mount
          Vernon, but Mount Vernon disclaimed coverage the following day, believing
          that Jancetic’s claims were excluded under the Policy. Id. at 96. Source One
          did not dispute Mount Vernon’s analysis, and neither Source One nor any other
          party to the lawsuit involved Mount Vernon further.
    [5]   Jancetic eventually settled with Hadu, but Source One filed for bankruptcy
          protection. After obtaining relief from the bankruptcy stay, Jancetic pursued
          his case against Source One at an August 17, 2015, bench trial. Source One did
          not attend the trial. Jancetic presented evidence regarding the expenses he
          incurred fixing the water and mold problems in the house. He also testified that
          the furnace and the sump-pump had to be replaced. Altogether, the cost of
          rebuilding, testing for mold, and removing moisture totaled $149,496.33, and
          the trial court entered judgment against Source One in that amount.
          Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 3 of 7
    [6]   On September 17, 2015, Jancetic filed a verified motion for proceedings
          supplemental, seeking to recover from Mount Vernon pursuant to the Policy.
          After Mount Vernon filed an answer, the parties filed several motions to the
          trial court, including a “Motion for Judgment” from Jancetic and a motion for
          summary judgment from Mount Vernon. On July 1, 2016, the trial court
          granted Jancetic’s “Motion for Judgment,” denied Mount Vernon’s motion for
          summary judgment, and entered judgment against Mount Vernon in the
          amount of $149,496.33. Mount Vernon now appeals.
                                       Discussion and Decision
    [7]   A proceeding supplemental is not an independent action asserting a new or
          different claim from the claim upon which the judgment was granted, but is
          merely a proceeding to enforce the earlier judgment. Hermitage Ins. Co. v. Salts,
    698 N.E.2d 856
    , 858-59 (Ind. Ct. App. 1998). In proceedings supplemental to
          recover judgment from a liability insurer, the judgment creditor bears the
          burden of showing a judgment, the insurance policy, and facial coverage under
          the policy. Id. at 859. Once the judgment creditor establishes this prima facie
          case, it is incumbent upon the liability insurer to go forward with evidence
          creating a genuine issue of fact. Id. Where the evidence is entirely
          documentary or the decision is based upon an admission or stipulation by the
          parties, this Court is in as good a position as the trial court to determine its
          force and effect. Williamson v. Rutana, 
    736 N.E.2d 1247
    , 1249 (Ind. Ct. App.
          2000). Thus, this court’s review of the trial court’s decision is de novo, and no
          presumption in favor of the trial court exists on appeal. Id.
          Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 4 of 7
    [8]   The interpretation of an insurance policy is generally a question of law
          appropriate for summary judgment. Liberty Mut. Ins. Co. v. Michigan Mut. Ins.
    891 N.E.2d 99
    , 101 (Ind. Ct. App. 2008). We review an insurance policy
          using the same rules of interpretation applied to other contracts; if the language
          is clear and unambiguous, we will apply the plain and ordinary meaning. Id.
    [9]   Here, we find that the Policy clearly and unambiguously excludes from
          coverage any “dishonest, fraudulent, criminal or malicious act or omission or
          deliberate omission or deliberate misrepresentation committed by, at the
          direction of, or with the knowledge of any Insured.” Appellant’s App. p. 192.
          While the Policy does cover “any Claim arising out of any negligent act, error,
          [or] omission . . . committed by the Insured in the rendering or failure to render
          Professional Services for others,” id. at 188, Jancetic has never alleged that
          Source One acted negligently. In his original complaint, he charged “[t]hat at
          the time [of] the representations relating to the hazardous conditions present on
          the property, both Defendant Hadu and Defendant Source One [], by and
          through its agent knew that these representations were false.” Id. at 75. The
          complaint continued, “Source One [] made fraudulent representations to the
          Plaintiff in order to sell a home . . . .” Id. Moreover, Jancetic alleged that
          Source One “knew at the time they were making false representations that they
          were inducing the Plaintiff to buy a home that had hazardous conditions . . . .”
          Id. at 76. Although he amended his complaint to include another defendant,
          the allegations made against Source One remained the same. Id. at 91-94.
          Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 5 of 7
    [10]   Further, at his August 17, 2015, bench trial, Jancetic only charged Source One
           with intentional behavior. His counsel told the court, “we have admissions by
           the realtor about things that he knew about the property before an offer was
           made.” Id. at 101. Counsel showed the court a request for admission in which
           it was admitted that
                   the realtor was informed that a water pipe burst in the house; and
                   that, as a result, the entire floor of the house was replaced . . .
                   [and] that on October 9, 2011, the realtor had informed the seller
                   that there was a dip in the floor. And the floor was checked, and
                   there was discovered water in the crawl space.
           Id. at 101-02. Counsel then presented other evidence to show that “the realtor
           was informed there was a problem with [the] HVAC . . . .” Id. at 102. After
           showing the court a copy of the disclosure form, in which Hadu and Source
           One said there were no issues with the house, the trial moved on to establishing
           the amount of damages. Because he has never alleged that Source One acted
           negligently, Jancetic has failed to meet his initial burden of showing facial
           coverage under the Policy.
    [11]   In different circumstances, we have held that “when an insurance company
           assumes the defense of an action against its insured, without reservation of
           rights, and with knowledge of facts which would have permitted it to deny
           coverage, it may be estopped from subsequently raising the defense of
           noncoverage.” Salts, 698 N.E.2d at 859. But this can only arise where “the
           insurer had notice of the litigation and an opportunity to control the defense.”
           Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 6 of 7
    [12]   These circumstances are certainly not present in this case: unlike the insurer in
           Salts, who defended its insured’s case at trial but failed to raise any defense of
           noncoverage, Mount Vernon asserted the defense of noncoverage from the first
           and had no further involvement in the case until the proceeding supplemental.
    [13]   In short, Mount Vernon agreed to insure Source One against its negligence but
           not against its intentional misrepresentations. Jancetic has only ever alleged
           that Source One committed intentional misrepresentations and has never
           alleged that Source One was negligent. Finally, Mount Vernon has not
           engaged in any conduct that would estop it from asserting its defense of
           noncoverage. The trial court should have denied Jancetic’s “Motion for
           Judgment” and granted Mount Vernon’s motion for summary judgment.
    [14]   The judgment of the trial court is reversed and remanded, with instructions to
           enter summary judgment in Mount Vernon’s favor.
           Vaidik, C.J., and Najam, J., concur.
           Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 7 of 7